The company released its 2023 three-quarter report. In the first three quarters of 2023, the company achieved operating income of 21,928 billion yuan, a year-on-year decrease of 11.78%, net profit of 934 million yuan, a year-on-year decrease of 80.98%, and net profit of 879 million yuan after deducting non-return net profit of 879 million yuan, a year-on-year decrease of 82.40%. Among them, operating income for the third quarter was 8.318 billion yuan, up 10.07% year on year, net profit of the mother was 325 million yuan, down 74.21% year on year, and net profit from non-return mother was 330 million yuan, down 74.43% year on year.
Major product markets are picking up, and performance in the third quarter improved markedly. The company's performance in the first three quarters declined sharply compared to last year, mainly due to large year-on-year price declines in the company's main products, such as glyphosate and silicone DMC, etc., and production and sales also declined to varying degrees year on year, resulting in a sharp decline in product profitability. According to Baichuan, the average prices of glyphosate (East China) and silicone DMC (East China) are 3.24 (YoY -46.82%, QoQ 16.32%) and 1.37 (YoY -31.29%, QoQ -7.79%) 10,000 yuan/ton, respectively. Since entering the third quarter, market conditions for products such as glyphosate, yellow phosphorus, and phosphate fertilizer have picked up, leading to a marked improvement in the company's performance from month to month. Furthermore, the company's wet electronic chemicals, food additives and other growing product markets generally maintained a healthy development trend, which was an important source of the company's performance during the reporting period.
Change fund-raising projects to improve the efficiency of capital utilization, and enrich projects under construction to help the company grow. On October 27, the company announced changes to some capital raising investment projects. The original fund-raising project was the “400,000 tons/year silicone production unit” in Inner Mongolia's new silicone material integrated cycle project. Considering the imbalance between supply and demand for silicone products and the continued decline in prices, the company decided to slow down the project appropriately. It plans to invest 383 million yuan in the remaining capital raised for this project into 2 million tons/year phosphate ore beneficiation and pipeline transportation projects in Houping. This will improve the efficiency of the company's capital utilization, increase the proportion of self-produced low-magnesium high-ratio semi-phosphate, and enhance supporting industry capacity. In addition, the holding subsidiary Xingyou Technology's “New 200,000 tons/year Ferric Phosphate Project (Phase I: 100,000 tons/year of ferric phosphate)” was officially put into operation on September 4. This will help the company make full use of its industrial integration advantages and accelerate the improvement of the layout of the new energy industry.
As of September 30, 2023, the balance of projects under construction reached 5.095 billion yuan. As key projects continue to advance, it will continue to contribute new profit space to the company in the future.
Maintain profit forecasts and maintain a “buy” rating. The company is expected to achieve operating income of 272.41, 286.89, and 30.515 billion yuan in 23-25 billion yuan, net profit of 14.92, 23.73 billion yuan, and 2,724 billion yuan. The corresponding PE is 14X/9X/8X, maintaining the “buy” rating.
Risk warning: pesticide prices are declining, project progress falls short of expectations